Moving a Loyalty Program to the Web

A major long-distance provider asked KnowledgeBase Marketing, an integrated marketing solutions company, to develop a new loyalty database and redesign a rewards program for the company’s highest-value customers. The goal of the program was to prevent churn and provide cross-selling opportunities. For 9 years, the long-distance provider had maintained a customer retention program on a mainframe, operating in batch mode. In Phase I, KnowledgeBase Marketing upgraded the system to a true real-time transactional database. Customers now could redeem loyalty points in real time through a call center, through an automated telephone system, or through the travel division. In addition, the new system provided the ability to offer more exciting rewards efforts, cross-selling opportunities, promotional tracking, and enhanced customer interaction with the company.

How the Loyalty Program Worked

Reward program members accumulated points through monthly long-distance phone usage. In addition, they were awarded quarterly and anniversary bonus points, as well as points for responses to special promotional campaigns. The accumulated points could be redeemed for invoice credits, travel options, and gift certificates for additional products and services.

Objectives of the Shift to the Web

KnowledgeBase’s real-time database was a very effective system for this long-distance provider. However, there were opportunities to improve costs and deepen the customer relationship by bringing the loyalty initiative directly to the rewards membership. Therefore, in Phase II, KnowledgeBase Marketing created an online redemption functionality for the loyalty platform, with the following objectives:

• Provide a Web-enabled interactive interface for the rewards program through the company’s own Web site, crossing through firewalls, to the KnowledgeBase loyalty database.

• Deliver the new system in 30 days.

• Increase retention and cross-selling opportunities with the new system.

• Reduce the operating costs of the loyalty program.

With the new system, customers could go online to obtain information, review their transaction history, and redeem loyalty points. Customers received email confirmation of their redemption seconds after the transaction, further creating a “live link” with the customer. Analysis of the rewards program, such as determining the type, frequency, and medium (Web, IVR, call center, etc.) of redemptions, is performed using a reporting database into which customer redemptions and other data are fed. IVR, of course, is Interactive Voice Response, the process of pushing buttons on a telephone keypad to get the information or the person you are seeking from an automatic phone answering system.

In the first week after the program was launched, the company had a 40 percent increase in point redemption. In subsequent weeks, Web redemptions grew by 5 to 10 percent. Web redemptions, of course, replaced phone redemptions. The average cost of a phone redemption was about $6. The marginal cost of a Web redemption was only a few cents. In the first year of the Web redemption program, the long-distance provider’s costs for maintaining the loyalty program were cut in half. Churn was reduced, and cross-selling initiatives were enabled through customer-friendly Web marketing efforts assisted by KnowledgeBase Marketing.